Fed survey: Economy falters in several U.S. regions

Published 10:10 pm, Wednesday, June 8, 2011

WASHINGTON -- For the first time this year, the economy slowed in several U.S. regions this spring. High gas prices weakened consumer spending, and the Japan crises reduced manufacturing output.

Four of the Federal Reserve's 12 bank regions suffered slower growth in April and May compared with earlier this year, a Fed survey reported Wednesday. The report confirmed a slew of data that portray a national economy whose growth has faltered. Hiring has slowed, orders to factories have declined and home prices have fallen.

Fed banks in New York, Philadelphia, Atlanta and Chicago said growth weakened in those regions. By contrast, the Fed regions in Boston, Cleveland, Richmond, St. Louis, Minneapolis, Kansas City, and San Francisco said growth there remained steady.

The Dallas region was the only one to report accelerating growth. That was mostly because of higher oil prices that benefited that region's energy industry.

The report, known as the "Beige Book," is based on anecdotal information gathered by officials at the Fed regional banks. It is released eight times a year and provides a more in-the-trenches review of the U.S. economy than government statistics do.

Japan's March 11 earthquake and tsunami have disrupted both auto production and sales. Many factories in the U.S. owned by Japanese automakers, including Toyota and Honda, rely on Japanese suppliers for electronic components and other parts. They have had to cut production because of shortages of those supplies.

The production cuts, in turn, have "substantially reduced the flow of new automobiles" to dealers, The Fed report said. That has cut auto sales in the New York, Philadelphia and Cleveland districts.

Retail sales declined in the Richmond and Boston districts, the report said, and grew at a slower pace in New York, Atlanta, Chicago, St. Louis and San Francisco. High gas prices were the main reason.

The New York Fed, which also oversees southern Connecticut and northern New Jersey, said that a major retail chain and a large mall in upstate New York reported slower sales in May, after "robust" sales in April. Gas prices almost reached $4 a gallon nationwide, on average, in early May, before falling back.

Farmers were hit hard by flooding along the Mississippi River last month, which put millions of acres of cropland under water. And in the Dallas region, a drought harmed the wheat crop. Agricultural conditions "were unfavorable across much of the nation," the report said.